Integrated Shariah Governance for Islamic Financial Institutions

Shariah Shari ah Governance: Governance: T Towards owards I Integrated ntegrated M for Islamic Financial Institutions. for Islamic Financial Institutions. Marketing Communication arketing Communication Yassir Yassir Salim BBA (Honors); MBA, ACIM BBA (Honors); MBA, ACIM Secretary General Secretary General - - CIFCA Salim CIFCA

Relevance of the Relevance of the Shari ah Marketing Communications Marketing Communications Shari ah Compliant Compliant Muslim markets are characterized by distinct needs compared to other markets, as they are governed by Shari ah based values. In as much as Shari ah is concerned, it covers every aspect of Muslim life, for example: To accept/ utilize Lottery is to violate Quranic injunctions on gambling. To accept/ utilize sexual appeal in advertisements is to breach Quranic injunctions on decency and modesty. To accept/ utilize the intrusion of homes and people s personal computers is to violate the Qur anic injunctions on Privacy laws and sacredness and sanctity of houses. To accept luxurious packaging is to violate Quranic injunctions on excessiveness. The list is endless.

The Prophet as Market Reformer The Prophet as Market Reformer - -1 1 The existence of the domestic and international trade at the time of the Prophet implies the existence of marketing communication. There was famous markets such as Ukkaz, Majannah and Dhul al- Majaz in pre Islamic Arabia. He guided marketing and consumer behavior through his teachings. He also set standards in guiding production behavior. He used to visit the marketplace to check what is going on and ensure smooth implementation of Business ethical codes. He travelled for Business purposes three times in his life.

The Prophet as Market The Prophet as Market Reformer Prophet s Teachings Prophet s Teachings Reformer - -2 2 Allah Guides not profligate liar. (40:28); May liars perish. (51: 10) Kadhb literally means the opposite of truth lie, false, cheat. O believers do not eat each other s property by wrong means (4:29) The Swearing may persuade the buyer to purchase the goods but that will be deprived of God s blessing. (Sahihil Bukhari) Both parties if they speak the truth and make everything clear they will be blessed in their transactions, but if they tell a lie and conceal anything the blessing in their transaction will be blotted out. (Sahihil Muslim) It is illegal for one to sell a thing if one knows that it has defect unless one informs the buyer on defects. (Sahihil Bukhari)

Marketing Mix According to Jerome McCarthy, it is the combination of four Ps (Product, Price, Place, Promotion) and a fifth P , People (customers, competition, and employees), which are the basic building blocks of a marketing program. (Ref: Paul R. Smith, marketing Communication: an Integrated Approach, (London: Kogan Page Ltd, 1997,) p 4-15) Smith (1997) (ibid) has regarded the fourth P, promotion as having its own mix of communication tools which consists of twelve elements: personal selling, advertising, sales promotion, direct marketing, publicity, sponsorship, exhibitions, corporate identity, packaging, point of sale and merchandising, word of mouth and digital marketing.

1. Product Communication 1. Product Communication Products and services symbolize love, security, moral and religious values, attitudes to health and our beliefs about the world. Worsam - cultural values are still very localized and more complex and important products have to meet the needs of the target segments. (Worsom, Mike, Marketing Operations 1998-99, Oxford: Butterworth-Heinemann, 1998) p 323 Islamic Islamic Values Understanding various Islamic Laws governing products is very crucial in marketing communication. For example: Values Shari ah standards (AAOIFI) are governing the Islamic Finance products, Islamic laws on ingredients such as gelatin, rennet, alcohol, E-numbers etc. are providing Guidance for Halal Industry across the countries. These standards and guidance are based on Ethico-moral transcendental values and emanates from the Qur an and Sunna. Its overriding concern is to preserve public health and morality, prevent conflict, unjustified profits and fraud.

2. Pricing Communication Price making is the right of the owner of the product or deliverer of these services as proclaimed by the prophet, The owner of the thing has more right to suggest the price. (Sahihil Bukhari Vol:3 chapter 42) What is required the price should correlate with the product or service value. Islamic Values Islamic Values Pricing methodology should take into consideration Islamic guidance against Tatfif, Bakhs, Ihtikar, Maisir, and Riba. In case of profiteering, Ibn Qayyim Jawziyya, in al-Turuq al-Hukmiyyah fi al-siyasahh al-Shar iyyah, p28, said, The owners of the items may be forced to sell according to acceptable market prices.

3. Promotion Communication A. Advertisements Advertisements - - 1 1 There is the changing trend of advertisement from the noble purpose of providing information that may benefit the people to become the art of deception par excellence. Now days, advertisements contain the appeal for various appetites of humans for vanity, sex, pleasure, and comfort, and the redefinition of happiness and contentment in purely materialistic, egotistic and subjective terms.

A A. Advertisement . Advertisement - - 2 2 Sexual appeal is the most widely used in marketing and the most restricted in Islam. The arousal of sexual fantasies in persuading buyers to purchase products is condemned. As an alternative, some of the appeals that are allowed as per the approval of Shari ah experts are Environmental appeal, Emotional Appeal, Rational Appeal and Functional appeal Other Factors to be Screened for Shari ah Compliance in advertisements are as follows: (a) Pictorial Images, (b) Gender, (c) Music, (d) Dress, (e) Language, (f) Symbols, (g) Dance, (h) Songs, (i) Appeals. (j) Place

B B. Sales Promotion . Sales Promotion- -1 1 Are the all forms of sales promotion acceptable? Sales promotion can be broken down into three areas from consumer point of view. 1. Free consumer gets something free free extra product, x% more on this pack; buy one get one free, 3 for the price of Z; free in/on/with pack. Islamic View: Islamic View: Totally accepted in Islam. Prophet has been reported to have said, weigh and exceed it Zin wa arjah . The prophet said, O weigher, weigh and lower the scale to weigh more. Whenever you weigh, weigh more. (Sunan Ibn Majah, Vol 3, N0 2220. 2221, 2223).

B B. Sales Promotion . Sales Promotion- -2 2 2. Save: Self Liquidator Premiums (SLP s), it is called self- liquidating because the aim is for the promotion to be totally self-funding, with all costs of the gift/ postage being covered by the customer. Islamic View: Islamic View: It is unethical as the customers are thinking that they are gaining while in reality they are just buying it as from somewhere else. It is resembles also taking one s gift back, which is not allowed. The Prophet said, One who gets back ones gift is like a dog that swallows back its vomiting. (Ibn Majah Vol.3, No 2386, p 422)

B. Sales Promotion B. Sales Promotion- -3 3 3. Win competitions and free prize draws such as contests, sweepstakes and games. Islamic Islamic View: Before launching this type of sales promotion, it is better to collect sufficient information for its acceptability by the public. Furthermore, it is better also to seek legal opinion from the Muslim jurists of the specific country to acquired proper Shari ah guidance. View: All these kinds of competitions and its associated prizes are allowed and deemed as acceptable as long as they have been screened properly by Shari ah scholars and there is no betting from the participants nor any extra payments from the customers in entering the draws. It should be just free gifts at the discretion of the seller. The use of Random drawing is acceptable in Islam as illustrated in the Qur an, (3: 44) (37:141)

D. Personal Selling D. Personal Selling Truthfulness and honesty are the cornerstone of Islamic ethics on personal selling. Thus swearing, coercion, deception, cheating and false testimonies are the elements that are categorically condemned in Islam. Terence(ibid; p. 211) acknowledged that building long term relationship with customers can not be accomplished with deceit, misrepresentation or undependable behavior. Islamic Guidance on Interpersonal Communication: speak to them kindly and words of honest advice (4:5) (Qawlan ma aru-fan) speak to them kindly and pleasing words (4:8) (Qawlan Ma aru-fan) speak the truth and proper words . (4:9) (Qawlan Sadiydan) say to them profound words touching their very souls (4:63) (Qawlan Baliyghan) always address them in gracious words . (17:23) (Qawlan Kariyman) speak to him with gentle words (20:44) (Qawlan Layyinan) speak to them gently and well meaning (17:28) (Qawlan Maysu-ran) speak it properly in decent words . (2:235) (Qawlan Ma aru-fan)

Conclusion Islam to reform marketing practices. These reforms sought to purify the market from practices that are considered by Islamic Ideals of fair play, honesty, justice, and generosity as unethical. Thus, Islam has extended morality to the marketplace. These reforms are covering all aspects of marketing practices from products that can be offered to the market to promotional behavior to be pursued.